Faisal Islam on Alastair Darling
Updated on 25 November 2008
Faisal Islam talks about Chancellor Alastair Darling's comments to Gary Gibbon.
Samira Ahmed: I'm joined now in the studio by our economics correspondent, Faisal Islam.
Faisal, what do you make of Alistair Darling's comments? Is he a gambler?
Faisal Islam: Well, he's not so much gambling, he's carefully trying to work out and leave room for what he may need to do in future.
The most significant part of that interview, which really builds upon yesterday's statement, was when the chancellor said "If we need to do more, we will do more."
Now, there was a mystery about yesterday's budget. It was billed as a stimulus budget, but actually what we got was more austerity - more about tax rises and spending cuts, that was more of the balance, than stimulus.
So it may well be that they need to leave some room for a further stimulus package, just as America has had to leave room for a stimulus package under President Obama. They had one six months ago. They're going to have another one now.
It might be that we have room for another stimulus package, perhaps well timed ahead of any election, next spring. So that's one thing to watch out on. And the chancellor did not suggest that that was out of the question.
Samira Ahmed: What about specifically on housing?
Faisal Islam: Well, clearly, that didn't feature hugely in yesterday's budget announcement, but there was this report, the report from James Crosby that we heard about before, and that's highly significant, it coming out.
The mood music around the chancellor was that he wanted to do something. He accepted the conclusions from James Crosby. James Crosby suggests a £100bn injection might be required over two years into these mortgage markets to kick-start specifically mortgage lending.
However, as you've seen, Mervyn King, governor of the Bank of England, has been talking. And in his own coded King-speak, he doesn't seem too happy with that plan, given what he was saying before.
Mervyn King: Crosby's scheme was restricted to only one kind of lending. It's not obvious to me why you'd want to discriminate in favour of mortgage lending, as opposed to lending to small businesses, for example. It would be a big mistake to regenerate lots of lending in the housing market at the expense of crowding out lending to small businesses.
So I think what's most important now is to sit back and ask how these Crosby proposals would fit with the proposal for the credit guarantee scheme, which I see as a broader-based scheme which doesn't discriminate among different kinds of lending.
Samira Ahmed: All very polite, but there seems to be a strong implicit criticism there.
Faisal Islam: Right. What we're specifically talking about is the original Crosby proposal to kick-start mortgage lending, (which) came in April. Since that we've had the bank bailout, and part of that was this £250bn scheme to guarantee bank to bank lending. It seems that the Bank of England thinks that that's replaced the need for a Crosby-type solution.
So you have some battle lines here. You have the Bank of England wanting to be more conservative, saying we shouldn't favour mortgage lending particularly - indeed, this type of lending caused the problem in the first place.
The treasury, of course, given the dire numbers that we had this morning, may be thinking about a further injection, another tens of billions of pounds backing our banks.
